$Viatris (VTRS.US)$Revenue declined 4% and 9% respectively o...

In 2023Q1, revenue fell 11%, operating profit fell 44%, and net profit fell 44% to $225 million. It seems difficult to maintain recent high growth.

The income statement shows that interest expenses in 2022 accounted for 36% of operating profit. In previous years, the share was higher or even higher than operating profit. The interest burden was very heavy, and the debt risk was high. More than half of the ultra-high net profit in 2022 came from other non-operating income, and future sustainability is questionable.

The balance sheet shows that goodwill and other intangible assets increased by 20.8 billion dollars in 2020. Large-scale acquisitions were probably carried out, so the data for the past 3 years is worth referring to.

The balance ratio has declined from 62.7% to 57.9% in the past 3 years, and further declined to 57.5% in 2023Q1.

Cash increased from $1.05 billion to $1.47 billion, accounts receivable fell from $4.84 billion to $3.82 billion, returning to a healthy range of revenue for one quarter. Inventory fell from $5.47 billion to $3.52 billion, a significant improvement.

Goodwill and intangible assets have been depreciated by $9 billion to $33 billion in the past two years, 1.6 times net assets of $21.1 billion, of which goodwill is 10.43 billion. There seems to be a possibility of further depreciation.

Long-term loans of $18.015 billion are 85% of net assets, and the leverage ratio is not low.

Net cash flow has far exceeded net investment over the past 5 years, and shareholders' surpluses are high.

Currently, the price-earnings ratio is 5.5. Due to the decline in Q1 data, the price-earnings ratio TTM has increased to 5.9. If non-operating income is not calculated, net profit is only about 900 million, which corresponds to 12.4 times the price-earnings ratio.

Looking at this stock is very complicated. It has a very strong ability to generate cash, but the interest burden is very heavy. Profits seem to be falling recently, but interest-bearing liabilities have been declining, and there is a lot of pressure to depreciate goodwill and intangible assets, but the valuation is really not high. Gross margin has improved recently, but the return on net assets is very low. Overall, it's quite appealing, but it involves a lot of risk, so wait and see for a while.